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Recent Changes in the US Business Cycle

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  • Chauvet, Marcelle
  • Potter, Simon

Abstract

The US business cycle expansion that started in March 1991 is the longest on record. In this paper we use statistical techniques to examine whether this expansion is a one-time unique event or whether its length is a result of a change in the stability of the US economy. Bayesian methods are used to estimate a common factor model that allows for structural breaks in the dynamics of a wide range of macroeconomic variables. We find strong evidence that a reduction in volatility is common to the series examined. Further, the reduction in volatility implies that future expansions will be considerably longer than the historical record. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 69 (2001)
Issue (Month): 5 (Special Issue)
Pages: 481-508

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Handle: RePEc:bla:manchs:v:69:y:2001:i:5:p:481-508

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  1. Sensier, M. & van Dijk, D.J.C., 2001. "Short-term volatility versus long-term growth: evidence in US macroeconomic time series," Econometric Institute Research Papers EI 2001-11, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Francis X. Diebold & Glenn D. Rudebusch, 1990. "Have postwar economic fluctuations been stabilized?," Discussion Paper / Institute for Empirical Macroeconomics 33, Federal Reserve Bank of Minneapolis.
  3. Christina D. Romer, 1995. "Remeasuring Business Cycles," NBER Working Papers 4150, National Bureau of Economic Research, Inc.
  4. Koop, Gary & Potter, Simon M., 1998. "Bayes factors and nonlinearity: Evidence from economic time series1," Journal of Econometrics, Elsevier, vol. 88(2), pages 251-281, November.
  5. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  6. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
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